P10-14 Project Evaluation [LO1]

Dog Up! Franks is looking at a new sausage system with an installed cost of $163,800. This cost will be depreciated straight-line to zero over the project's 8-year life, at the end of which the sausage system can be scrapped for $25,200. The sausage system will save the firm $50,400 per year in pretax operating costs, and the system requires an initial investment in net working capital of $11,760.

If the tax rate is 25 percent and the discount rate is 10 percent, what is the NPV of this project?

• $71,097.05

• $73,985.35

• $67,711.48

• $65,168.36

• $58,894.49